International Conference on
"Africa: The Challenge of
Economic Recovery and Accelerated Development"Abuja, Nigeria 15-19 June 1987
VARIABLE GEOMETRY OR COMPREHENSIVE AUTOMATICITY?
STRATEGIES AND EXPERIENCE OF REGIONAL
CO-OPERATION IN AFRICAby
Peter ROBSON University of St. Andrews
(Fife, Scotland, U.K.)
ECA/CERAD/87/9
I. INTRODUCTION
Virtually without exception, all recent internal or external action programmes or guidelines for sub-Saharan Africa assign a major development:
role tn economic integration and regional co-operation. The case for such economic co-operation is compelling and it can surely only be reinforced by recent definitions of priorities. In isolation, most small poor sub- Saharan States have extremely constrained development options. Their balanced development - and certainly any strategy that assigns any significant role to import-substitution - demands larger markets. For most countries, this points to some form of regional co-operation. This has long been recognized, and regional economic integration and co-operation have constituted an tltmtnt of sub-Sahar3n African development strategies for more than two decades. Yet the contribution of integration to development has not so far bten gr*:sts and in some casts may even have been negative.
This britf contribution has thr«e. parts:
(i) An outline of salient aspects of recent experience- with regional co-operation in sub-Saharan Africa;
(ii) A consideration of what that experience realistically suggests - assuming that present approaches and structures are maintained - with respect to the potential contribution of regional co-operation to overcoming thv present crisis in much of sub-Saharan Africa and in particular to attaining the industrial policy objectives set out in recent action programmes for accelerated development;
and
(iii) A discussion of somt indicated priorities for the improvement of performance.
STRUCTURES OF ECONOMIC INTEGRATION AND CO-OPERATION IN AFRICA
The following focuses on West, Central and Equatorial Africa, where a sufficient rangt of experience exists to bring out most of the salient issues. The Southern African Development Co-ordination Conference does, however, represent a different and potentially fruitful approach which should not be ignored.
Organizations for economic co-operation in K^st Africa are of four main typest (1) economic communities such as the Communaute economique de l'Afrique de l'Ouest (CEAO), tht Mano River Union (KRU) and the Economic Community of West African States (ECOWAS); (ii) natural resource development organs such as the River Basin and Lake Commissions5 (iii) common service organizatons providing technical or research services to their members;
and (iv) financial institutions such as tht central banks of the Wtst African Monetary Union and tht West African Development Bank. There is much overlap in the membership functions and objectives of these bodies. A far-from-
conclusive count (ECAS 1984) enumerates mor& than 30 such organizations in West Africa alone. In addition to th* three economic communitiess CEAO, MRU and ECOWAS, a fourth, Sen^gambia, is in the process of formation. The formation of another, a Ber.in Union to consist of Nigeria, Ghana, Togo and Benin, has been suggested (ECA, 1984) in the context of a rationalization of economic co-operation arrangements.
Equatorial and Central Africa possess three economic communities: the
Union douaniert dt-s Ecats d'Afrique centrale (UDEAC) set up in 1964 (which
shares a common currency and central bank)? the Communaute cconoraiqufc des Pays des Grands Lacs (CEPGL) set up in 1976; and the Communaute economique des Etats de I'Afriquc centralt (CEEAC) which was formed in October 1983.CEEAC groups together 10 member States, i.e. the members of UDEAC and CEPGL plus Equatorial Guinea and Sao Tome and Principe. It is the counterpart of ECOWAS for Central Africa.
In West Africa, CEAO and ECOWAS, though having the same basic objectives, have adopted very different strategics. It is useful to compare them and to evaluate their respective merits. In Central Africa similar types of problems arise: UDEAC itself has many similar features of CEAO and, on tht other hand, CEEAC is clearly likely to confront some of the problems encountered by ECOWAS.
II. COMMUNIAUTE ECONOMIQUE DE L'AFRIQUE DE L'OUEST (CEAO)
CEAO is the most solidly established of the West African communities.
It was established in 1973, under the Treaty of Abidjan, and comprises Cote d'lvoire, the Nigers Burkina Faso, Mali, Mauritania, Senegal ands since its admittance at the summit meeting in October 19S4, Benin.
The CEAO Treaty requires the establishment of a customs union, but
although a so-called common external tariff has been adopted, this so far
represents only a small component of the aggregate duties that are imposed on imports. At its present stage, the CEAO is best described as a preferential trade area in which trade is, in principle, free for .produit£du cru and is partially liberalized (by tht granting of tariff preferences and "the elimination of non-tariff barriers) in respect of manufactured products of local origin. This arrangement is capable of avoiding tht distortions that would otherwise be produced by free trade with widely divergent national tariffs.
The integration of product markets through trade liberalization is buttressed by a scheme which provides compensation for losses from trade
diversion arising from trade liberalization. Compensation is not provided
for any losses that might arise from trade creation, but in CEAO this is imaterial since each country can effectively protect its high-cost industries by limiting the tariff preference it accords to its partner State underthe special regime (termed the Tax*; de coopEration ragj-onale - TCR) that
can be applied to manufactured products of Community origin in place of
the import duties that would otherwise be levied. The rates, applied bymutual agreement, fall mainly within a band of 40 to 60 per cent of the
tariffs applied to countries outside the Community, but some are as lowECA/CERAD/87/9 Page 3
as 10 per cent and a few are as high as 90 per c*nt. They art fixed for each industrial establishment, and normally discriminate in favour of the Community's less developed members which, with one exception, ar^ land locked.
Intra-Community trade is a relatively low proportion of total trad*:
(12 per cent in 1983) and only a proportion of this trade is in manufactured products. Of the latter, howtver, a growing proportion is covered by TCR arrangements. Thus in 1981 the share of TCR imports in total manufactured imports from the Community was 42 per cent for Burkina Faso; 42 per cent for Mali; 70 per cent for the Niger; 78 per cent for Senegal; and 55 per cent for Cott d'Ivoire (no comparisons art availeblc for Mauritania since 1976). In 1981, Cote d'lvoire's share of the preferential exports had risen to 70 per cent of the total, whil^ the shart. of Senegal had fallen to 23 per c«nt. In this trade, Senegal and Cote d'lvoire enjoy substantial surpluses with their partners, and this is the case also in total Community tradt in manufactures (which is relevant for the contribution key to the compensation fund)? all the other countries havu deficits.
A valuable feature of this arrangement is that each country effectively retains its policy flexibility and autonomy with respect to the establishment of new industries. Consequently/ even before the industrial harmonization envisaged by the Treaty is attained, a participating country's interest is unlikely to b* damaged by the operation of the Community. This is an outstanding ■example of 'variable geometry' in economic integration. It is a workable basis for limited economic co-operation, and it minimizes distributional difficulties and harmonization problems. But a corollary is that the opportunities it affords for generating economic gains are likely to be. modest by comparison with those that would in principle be available from more ambitious schemes.
III. ECONOMIC COMMUNITY OF WEST AFRICAN STATES (ECOWAS)
ECOWAS is without doubt the most ambitious grouping in sub-Saharan Africa. This 16-country grouping, which was inaugurated in 1975, includes the member States of MRU and CEAO, togtith^r with Nigeri3, Ghana, the Gambia, Benin, Togo, Guinea-Bissau and Cape Verdt. Together these States constitute a geographical zone larger than Western Europe. ECOWAS includes some of the richest and most populous countries in Africa, several of1which possess immense mineral risourcss. It also includes a majority of tha poorest countries in Africa.
ECOWAS is govtrned by tfe ■ Treaty of Lagos which includes a number of time-tabled commitments with respect to (i) a tariff standstill;
(ii) trade liberalization; (iii) fiscal harmonization; and (iv) the
introduction of a common external tariff. Since 1981 the Community has been endeavouring to implement the second of these commitments. The timetabled commitments are coupled with untjmetabled obligations to adopt wider policy measures of 'positive' economic integration, including industrial co-operation.The ECOWAS Treaty is very elaborate (modelled on the Treaty of Rome)
but it left most substantive issues to be. resolved subsequently. As an integration strategy this approach has many precedents, though nowhere else has it been pursued so rigorously. Such an approach, perhaps inspired by functionalist^ evidently does not induce difficulties to disappear;it merely puts off the need to resolve them. It is unfortunate that, having Cevistd a Treaty whose general provisions art coherent and ultimately mutually reinforcing,, the Community should nevertheless have bznn led by its provisions to give priority initially to market integration and free competition - whin market signals, because of widesprtad and severe distortions, ar*. likely to be so misleading - and to neglect the positive policy measures on which the success of the integration process must ultimately hinge.
ECOWAS cannot yet be said to havt a developrotrit strategy, except in the limited s^nse that competition and the free working of market forces are to be facilitated. It has r.o common external tariff and, unlike the cast of the Treaty of Rome, there is no indication in the Lagos Treaty as to how one is to be reached. Th* Treaty moreover requires trade liberalization to take place in advance of tariff harmonization, unlike the procedure followed in most other groupings wheri- either liberalization has been madt conditional on prior tariff harmonization (so providing a stimulus to the formation of a coranon external tariff and avoiding possible
misallocations of resources that might otherwise be produced), or other devices were adopted to avoid distortions (as in CEAO and UDEAC).
In themselves, the implementation of timetabled measures of trade liberalization would almost inevitably operate adversely to tht interests of the lesst developed members. Thty would suffer both from trade diversion and from trade creation: their imports of many products from the rest of the world will be replaced by higher cost products of the import-substitution industries of their more advanced ECOWAS partners 3rd, in addition, their own import-substitution industries will t^nd to be
vulnerable to competition from thtir partntrs.
The Treaty dots contain provisions designed to ameliorate these problems which, if left unchecked, would certainly result (as they havfc elsewhere in Africa) in a maldistribution of the costs and benefits of integration, and ultimate collapse. The principal provision, which is to comt into
force synchronously with trade liberalization, provides for fiscal
compensation for revenue losses incurred in the process of tradeliberalization. A specific schema was agreed by a decision in 1980 (A/DEC 19/5/30), which should approximately compensate the least developed member States for the 'impact' national income losses (reflected in tariff revenue losses) which they would incur as a result of trad- diversion. The
provisions do not, however, compensate for any income losses that may arise from a curtailment of production in any import-substitution industries that the least developed members may possess - that is, from trad* creation.ECOWAS has also agreed that in implementing its trade liberalization
provisions, the less advanced countries may pursue a slower timetable than
ECA/CERAD/37/9 Page 5
the more advanced members, although they will still have to complete the
process by the same terminal date.
The Treaty also contains other provisions that are designed to ensurs.
that the interests of tht Community's Uss developed members are protected.
Thus, although the Treaty emphasizes measures designed to avoid the distortion of competitive forcrs and to promote uniform market conditions so as to give full scope to specialization, it si bo stresses the need to promote a fair and equitable distribution of benefits. In relation to that objective tht ECOWAS Fund for Co-optration Compensation «nd Development has a key role. It is through this Fund in the first place- that compensation
for revenue losses is to be provided. In addition, the. Fund is to promo to development projects in tht less developed tn*mb*.rs of the Community.There are other provisions in the Treaty from which the Community's ltaat developed members might also expect to benefit, such as the industrial development provisions which might limit the polarization of development that has characterized integration-induced dtvelopment in other less developed groups. However, although the customs union obligations are firm and timetabled, and the procedures are largely worked out, the broader polici&s of industrial development, and the special emphasis on projects in backward members, remain xn the realm of aspiration. If the experience of other African groupings is any guide:, it will not prove easy to implement
them.
In respect of policies towards foreign direct investment, ECOWAS, nudged by Nigeria, evidently seeks to develop a more. positive and radical approach than those of CEAO and MRU. Indeed, bargaining with multinationals appears to have bet-n very much in the minds of those who dtvised the provisions of the ECOWAS Treaty. Ultimately, any useful policy in this field will have to rest on a prior harmonization of investment incentives and of industrial development programmes, sines it is basically tht lack of harmonization of theat key policy areas which accounts for many of the effects or abuses of which ECOWAS countries (in common with other developing countries) complain and which may tip tht balance of benefits unduly in tht favour of the foreign investor. So far, however, tht principal step
taken Within ECOWAS has been to add a local participation provision toits rules of origin. In itself that is likely to exacerbate the problems of its less dtewlopfcd members, and without a prior harmonization of
investment incentives, it cannot be expected significantly co amelioratethe problems postd by foreign dirtct investment (of which ownership is only one aspect). For the time being, indeed, the provision. simply has
the effect of rendering any trade liberalization commitments nugatory,
since those countries (e.g. Nigeria and Ghana) which can meet the participation requirement are unable co export competitively in W.^st.Africa, whereas those which account for the bulk of intra-ECOWAS exports (e.g.
Cote d'lvoirt and Senegal) cannot meet tht ownership requirement.
IV. THE PERFORMANCE OF EXISTING ECONOMIC CO-OPERATION ARRANGEMENTS
The problem of assessing the costs and benefits of existing arrangementsfor integration in sub-Saharan Africa is difficult and will not be attempted
here. Many of the relevant factors cannot be quantified and even for those that can be, there is the difficulty that the costs usually make themselves evident promptlys whereas benefits accrut chit, fly in the long term.
Neverthelesss it is important to attempt a bread evaluation of existing programmes and strategies in order to determine what weight can realistically be placed on th«ir future contribution and 3 more importantly9 to try to discern what policy reforms or changes in emphasis seem to b^ indicated if they are to play the rolt expected of them.
For that purpose we need to have clear in mind how integration can make a contribution to development. At tbt . purely economic level the key object of integration is to expand the opportunities for investment that will profit the African peoples and that will contribute to the mobilization of their underemployed resources. Tc this end, rationalization of the emergent structure of production is indispensable. That has to be undertaken in such a way as to taka care of th<i interests of all participants, in particulsr of the less developed members. To do this, a variety of instruments, agreements and compromises will be required.
The West African economic communities that have been established, and are in the process of being established, are from these points of view, very comprehensive. But they have failed to address problems in the right order; they have often given priority to policy areas which are of little immediate relevance; and they are apt to overburden particular instruments by requiring them to perform too many functions. These points may be illustrated by the experience of CEAO and tht programme of ECOWAS. To some extent, similar problems arc present in UDEAC, and can be anticipated for CEEAC.
CEAO has made substantial progress towards implementing its treaty provisions in customs affairs. It has adopted a common customs and statistical nomenclature. Agreement has also been reached on a simplified and harmonized structure of customs and internal indirect taxes. Tht specific measures for trade liberalization and trade expansion involving the duty-free circulation of most p£^uJLtjs_du__£ru and preferential treatment for manufactured products originating in the arta have been implemented and have facilitated a growing and now substantial amount of intra-group trade. An absence of exchange problems because of the common currency (except for Mauritania) is also a favourable factor for economic integration in the subregion. Much progress has also baen made with th« elimination of non-tariff barriers and specifically, of quantitative restrictions, though some of the latter remain in defiance of tht treaty (particularly in textiles). In other fields of co-operation, such as agriculture and transport, progress so far has been Uss obvious, though steps have been taken to d&velop regional training and research institutes, and several useful Community projects, e.g. in the: field of fisheries.
But any significant rationalisation of industrial production is absent.
There is little inter-country specialization on particular products or product ranges anc* thus little intra-industry trade. In numerous sectors of industry plants art replicated, and production takes place on a smaller
ECA/CERAD/37/9 Page 7
scale than the size and structure of the regional market would permit.
The advantages of integration art thereby dissipated insofar as they derive
from specialization and the exploitation of scale economies. Uneconomicreplication has occurred in textiles (despite the interlocking links of a number of the multinationals involved), pharmaceuticals, plastics, food industries, electrical products (i.«. batteries) etc.
In UDEAC, a strikingly similar situation is found. In UDEAC the: taxe
unique operates in a very similar way to the TCR. A number of the transnational corporations that operate in CEAO - Bata, Rie-gUs Schatfwr - are also active in UDEAC, and, as in CEAO, tbfcy account for a very high
proportion of sales in a number of industries.
The plant replication found in these two groups is not to any
significant extent an inheritance from a pr^-integration era. It has largely grown up and continues to develop in the face of arrangements for integration. It has been buttressed by a failure to harmonize national investment incentives, and it reflects, in particular, the absence of any regional industrial development programme or any concerted regional approach
towards foreign investment and multinational enterprises.It is clear that both domestic and international forces have interacted to produce market segmentation and plant replication in CEAO. No matter how the responsibility for the outcome is assigned between these forces, the effect is undeniable. It is to rob integration of much of its hoped- for benefits, and to hinder the attainment of important subsidiary objectives of development policy such as the creation of inter-industry linkages.
The experience of CEAO and UDEAC, in these ar.d other respects, makes it difficult to believe that they have had a major development impact so far. And, more important, there are few signs that the factors which impede
an improvement of that irapact arc- currently accorded much attention by
policy makers and politicians of the participating countries. A World Bank initiativt a ftw years ago which would havt tried to idtntify the possibilities for regional indusrrial co-operation in CEAO seems to have been quietly discouraged. Nevertheless* despite its limitation, the CEAO approach (and to some extent this also applies to UDEAC) has two important merits which are capable of being built upon: (i) it is capable, as noted, of avoiding the distortions that would otherwise be produced by trade liberalization undertaken against the background of initially very diverse tariffs; and (ii) it provides a workable basis for co-operation in the stage prior to industrial harmonization. Of course, it could justifiably be argued that even with policy reforms, the markets of both CEAO and UDEAC are too small to produce really significant benefits anyway - a point which leads to a considtration of the role of the broader groupings such as ECOWAS and CEEAC.Since its establishment, the principal achievement of ECOWAS has been
to create 5n institutional framework for a customs union* An ECOWAS tariff
nomenclature has been adopted and common customs documentation has been developed. A range of important protocols needed to give effect to treatyprovisions in respect of trade and customs havs also been adopted, thus giving operational content to some of the raore general provisions of the Treaty. In its ECOWAS Fund, the Community possesses an institution of potentially great importance for promoting positive integration, development and balance. Nevertheless the Community's present strategy displays crucial weaknesses that will have to be overcome if progress is to bt made and benefits are to be realized. These wwaknesstts substantially contribute to one of the most widely criticized aspects of ECOWAS, namely that the decisions it adopts at the level of Keads of State or Ministers almost invariably fail to be implemented by action at national level.
The weaknesses of ECOWAS stem from many factors, but there are two which are closely connected with the integration strategy chat is being followed, namely: (i) the priority accorded to trade liberalization and tht automaticity of the process? and (ii) tht lack of simultaneity in the obligations and benefits implied by the Community's programme.
Although the classical trade liberalization approach to integration among developing countries has long been discredited, the ECOWAS treaty nevertheless gave priority to trade liberalization on an obligatory, automatic 'across-the-board' basis, and its explicit economic strategy emphasizes the lib£ratxon of competitive forces. But the framework within which competition would operate is, as yets fortuitous because there is no agreed general structure of protection (to be provided ultimately through the adoption of a common external tariff and harmonized investment incentives). The ECOWAS programme of automatic trade liberalization would come into effect - if it dots - against the background of national protective structures that are diverse, and generally very high, but which in any case have net been constructed with the needs and opportunities of a regional market in mind. It is very difficult to predict the effects of liberalization in such a framework, but there are no a__pjrl_qri grounds for supposing that its resource allocation and developmental effects would be favourable. Although any adverse distributive effects resulting from trade, liberalization in this rather unsatisfactory context should be largely offset by the Community's compensation scheme, that in itself cannot justify tht pattern of trade which might result. That pattern remains essentially unappraised (and indeed unappraisabK to the extent that it will depend on ownership just as much as comparative advantage). The compensation scheme also can do nothing to mitigate the economic distortions that may be encouraged in both importing and exporting countries if such trade liberalization were to be implemented.
The second weakness is on^ that primarily concerns the less industrially advanced members of ECOWAS, although to some extent it affects all. Despitc- tht treaty's emphasis on protecting the interests of the less advanced memberss ic cannot be said to offer the prospect of doing so adequately.
The timetabled obligations of the treaty concerning the customs union constitute measures from which the industrially less advanced members ar^
unlikely to benefit; rather, they can confidently expect to suffer through the trade creation and trad*; diversion that results. The measures from
ECA/CERAD/87/9 Page 9
which they might hope to benefit - in particular differential action through the Fund to promote their industrialization, and perhaps fiscal and industrial harmonization - are not timetabled and no specific proposals have yet been considered to give thtm operational content- Experience elsewhere in Africa will hardly incline less developed members to underrate the difficulties of devising and implementing such measures. All things
considered, it is not surprising that at least the (numerically dominant)
less developed members of the Community should have been tempted to hang back from implementing formal commitments ro liberalize trade until they are assured that their interests will otherwise be safeguarded.In any case, little can be expected of the trade liberalization programme in itself, even if it wert to be implemented. It may be an exaggeration to claim (EGA, 1984) that 'most countries of the region have nothing to tradi with anyway'. Sierra Leone, Liberia, Cote d'lvoire and Senegal do have surplus industrial capacity in relevant products, although their products in some cases, even at full capacity, seem likely to be uncompetitive even if fret of tariffs. But ic is surely true, as the ECA
report emphasized, that the development of productive capacity is one of
the most pressing problems of integration.
Apart from these considerations, the impact of trade liberalization commitments, evtn if fully implemented, would be limited for two further reasons. First, those countries of the region which enjoy a revealed comparative advantage would often be excluded from the regional market by the local ownership requirement of the rules of origin; second, if that hurdle is overcome, there remain the problems of currency restrictions
and the lack of convertibility of the currencies of several members of
ECOWAS such as Nigeria, Ghana and Sierra Ltone. The maladministration of thesa restrictions almost inevitably discriminates against intra-group trade. Rather late in the day, ECOWAS has turned its attention to the inconvertibility constraint. Its initially espoused solution, limitedconvertibility for intra-regional trade, seems (perhaps surprisingly) to
have been received approvingly by the. European Commission, but at least it might be better than the promotion of counter-trade-.One further problem must be note<? at this point. This concerns the relations between ECOWAS and CEAO and MRU (and the prospective relations between UDEAC, CEPGL and CEEAC). The failure of collaboration amongst the West African institutions is notorious. Ac the level of the economic communities, co-operation between ECOWAS and CEAO is virtually non-existent.
Until now each grouping has tackled similar problems often at the same time but independently and without consultation. This has resulted in different solutions *iv«n to the same technical problems, which present later problems of harmonization. Thus, to cite only early initiatives, there art threw customs nomenclatures, thrte different rules Of origin, two different and incompatible compensation systems, and two different and yet to bt. reconciled systems of trade liberalization. To deal with these and related problems ECA has recommended a substantial remodelling of the organizational structure of the subregional institutions for economic
integration (ECA3 1984). At the economic community level, the creation
of a new one - the Benin Union (to include Nigeria, Ghana, Togo and Benin) -
waa tentatively proposed. This suggestion was in the context of a moregeneral proposal that would have assigned a_ll members of EGOWAS also to one or other of the more compact groupings that would bt closer to the
interests of members. Thus the Gambia and Cape Vi;rdt would join CEAOS and Guinea-Bissau would join th* MF.U. This approach was seen as openingthe way to a greater concentration of affort on promoting integration and development through the smaller and aior^ intimate communities, rather than
through ECOWAS itself. The subsequent demand by Benin' for admission toCEAO, and its acceptance by that Community 3 underlines the attraction of
smaller communities, although in a manner which constitutes a further challenge to the position of ECOWAS.V. FUTURE FOR CO-OPERATION AND INTEGRATION IN SUB-SAHARAN AFRICA
In the light of recent experience, it is difficult to avoid the conclusion that the economic community approach to integration is likely to be unconstructive if there is no redirection of effort and institutional
reform in existing schemes and an avoidance of over-ambitious strategics in others now in th^ir formative stages. Five aspects suggest themselves:(i) Emphasis needs to be given to thte development of a suitable
infrastructure for regional economic co-operation. This hasbeen a constant theme of analysis and policy declarations for 25 years, but it bears repitition since it remains so basic.
Infrastructure links among African countries after more than a quarter of a century of post-independence initiatives still frustrate trade and wider forms of co-operation in posts, telecommunications and transport. Posts and telecommunications
are often much worse than at independfence. At the financial
level, intra-West African clearing arrangements can involve almost unbelievable delays of up to four-six months before final payments.The costs involved in delay and lack of prompt information constitute a major obstacle to incra-regional trade;
(ii) The development of more effective instruments and arrangements
for industrial co-operation is a second vital requirement. Indeed,
an ability to develop effective instruments for industrial cooperation, and co use them, is likely to be the single most crucial determinant of the future contribution of integration to sub-
Sahar^n economic development. It is necessary to be realisticabout what can be achieved! and which paths can be followed.
In East Africa, a group of just three countries found it impossible to implement a very limited industrial plan. In the Association of South-East Asian Nations (ASEAN) six countries currently find it difficult to agree on the establishment of a handful of large- scale industries to s*.rv^ the regional market (admittedly the foreign capital/multinational enterprise problem manifests itself -.
notably in Singaport - in a much more extreme form than it does
in most of Africa). To make progress in West and Central Africa,
ECA/CERAD/87/9 Page 11
and hopefully in other parts of Africa too, it may be necessary to encourage much more limited and flexible arrangements for industrial co-operation than have hitherto b«n envisaged (perhaps
between smaller" groups of as few as two or three countries):
perhaps overlapping groupings, and possibly resting on joint rinancial participation in capital, profits, tax revenues and even manning. To facilitate such initiatives may entail some
Edification'of established treaties of co-operation, andperhaps
the creation of smaller sub-groups such as the Proposed Benin Union. Initiatives of this kind would have to be handled c- ■ - -_-y if the process is not to be ultimately counter-productive. - -"f"-?>
■- or sub-community (for the smaller groupings) which would look towards some longer-term rationalization of production on a
regional basis would certainly be needed and it would be dispensable that fiscal incentives should be provided to
encourage the following of such guidelines;
(iii) Community guidelines for industrial development initiative should Commun y g realistic appraisal of the strengths of the subregion (or smaller areas within it), of the comparative strengths of individual countries within it, and on some very
"oaf agreement on the level and structure of P"""1"^0"^
which it would be reasonable for the region to work. The data on the basis of which such guidelines could be formulated have not been collected or evaluated in West, Equatorial or Cental Africa (The World Bank's research programme of the early 1970s on this subject for West Africa was not carried out for a sufficient number of countries, and has not been followed up:
he UNDP financed ECOWAS exercise of 1979/30 was diffuse lacked firm direction and specification, and conspicuously failedto produce any useful guideline.). W« can all agree, no doubt, that the really crucial factors in the progress and performance of integration are the political will to integrate and a willingness to compromise. Nevertheless there can equally be no doubt that the lack of relevant studies in Africa can be - and almost certainly is currently - an import constraint to constructive decision^taking. It is surely futile to expect constructive advance if structures and priorities are no. apt, and if the implications of policies cannot be perceived Dy member countries. Decisions to Integrate that .re not well-grounded wlU either be counter-productive or will fail to be implemented, . (iv) A fourth requirement is for payments reforms For most countries
payments restrictions in a way that does not discourage intra
regnal trade; in the longer term it is to reduce the need for
tnf restrictions themselves. As to the latter, there is mounting
evidence that those African countries which have undertaken policy adjustments to restore equilibrium in their balance of payments during the past decade have not suffered in terms of growth rates of real GDP or consumption. If this is really so3 and comes to be more widely perceived, then some of the apparently immovable obstacles to progress on this front may be lessened. Limited convertibility - the current nostrum - would : appear only to introduce further distortions into a system in which price systems are so riddled with distortions alrtady that they cannot, without major policy reforms, provide a dependable guide to intra-regional specialization and rationalization. A solution involving a major extension of existing monetary unions is unlikely, but small extensions have taken place in Equatorial Africa,, and others that cannot altogether be excluded may help modestly;
(v) Finally, to take another dimension altogether, the structures within member States for reacting to and for developing integration initiatives need to be strengthened. The problems outlined in the EGA report (pp.60-62) art well recognized and some countries are reported to be experimenting with new structures in an attempt to deal with them. It cannot he overemphasized - as the ECA Report rightly stresses - that development projects are, and will long remain, largely the responsibility of individual member States. These States must therefore be involved initially, continuously and intimately in any workable integration programme.
Attempts to integrate from above arc unlikely to make a significant impact.
In the light of the performance of African regional integration initiatives during the past two decades, can one be optimistic about the likelihood of progress on any or all of these fronts? There are several factors in the current situation that might suggest a mor<& optimistic prognosis than past experience appears to warrant. First, the protracted economic crisis is forcing domestic adjustments which hitherto could be put off. Paradoxically, the lack of will to give real priority to intra-regional adjustments and compromises and to the development of practical integration strategies could, for this reason, conceivably prove to be less of an obstacle during the next decade than it has been duting the past decade. Second, thert currently appears £0 be a renewed awareness on the part of major donors and aid agencies of the value of regional integration . and of the nted to provide external support for regional policies, projects, and institutional reform. Thert are perhaps therefore grounds for guarded optimism that internal and txtt-rnal forces in combination can produce the realignment and reph^sing of priorities that will b;.- necessary if co-operation and integration in Africa art to play the role they could in helping to overcome Africa's acute developmental problems.
